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The worldwide smartphone market will grow 12% in 2021, with shipments reaching 1.4 billion units, of which 610 million units will be 5G smartphones, according to Canalys’ latest forecasts. However, component supply will emerge as the new bottleneck for the smartphone industry despite vaccine roll-outs and consequently, a subdued pandemic.
By contrast, smartphone shipments fell 7% in 2020 due to major market constraints caused by the Covid-19 pandemic.
There is strong momentum behind 5G handsets, which accounted for 37% of global shipments in Q1, and are expected to account for 43% for the full year (610 million units). It will be driven by intense price competition between vendors, with many sacrificing other features, such as Display or power, to accommodate 5G in the cheapest device possible. By the end of the year, 32% of all 5G devices shipped will have cost less than US$300. It is time for mass adoption.
The component supply bottlenecks will hinder the growth potential of smartphone shipments this year. With a pile-up of backorders and an industry-wide Semiconductor shortage, every brand will “feel the pinch”.
Vendors will first turn to regional prioritization, focusing the flow of units into lucrative developed markets such as China, the US, and Western Europe at the expense of Latin America and Africa.
Region-wise, Greater China will dominate the industry with 394 million shipments, followed by Asia-Pacific (381 million), EMEA (355 million), North America (159 million), and Latin America (126 million).
The other angle to this is pricing, as key components, such as chipsets and memory, increase in price, smartphone vendors must decide whether to absorb that cost or pass it on to consumers.
According to a source, LTE chipset constraints will cause challenges at the low end, where customers are particularly price sensitive.
Smartphone vendors must look at improving their operational efficiency while lowering margin expectations in their low-end portfolios for the duration of the constraints, or risk hemorrhaging market share to their competitors.
Developed countries have seen an online surge, which has forced retailers to reassess their offline footprints. As a result, many stores will close this year, and for those that stay open, their purpose will be reimagined for customer support and order fulfillment, as customers increasingly use multiple channels during the purchase process. The new normal for the smartphone industry is as ruthless and competitive as the old one.